2023 (4) TMI 369 - AT - Income Tax

Exemption u/s 11 denied - Audit Report in Form 10B was filed while removing deficiency u/s 139(9) and was not filed at the time of filing the return - return was treated as defective u/s 139(9) by the revenue - HELD THAT - The filling of Form No. 10B is a procedural direction in in the proviso. The assessee is registered u/s 12A and followed the direction as per the Act during filing of return. For non-filing of Form No. 10B with the return is just a failure of procedural system. Form 10B was filed within stipulated time for removal of defect in the return. See case of Sarvodaya Charitable Trust vs. Income Tax Officer. 2021 (1) TMI 214 - GUJARAT HIGH COURT The assessee had rectified the defect within stipulated time and the procedure for filing Audit Report was completed. We find that assessee is eligible for deduction u/s 11 of the Act. The addition made by the ld. AO is liable to be quashed. Accordingly, the appeal of the assessee is allowed.

Summary

Issues Involved:
1. Disallowance of deduction u/s 11 for failure to file audit report in Form No. 10B with the return u/s 139.
2. Interpretation of statutory provisions and legal precedents regarding the filing of audit reports for claiming deductions.
3. Adjudication on the eligibility of the assessee for deduction u/s 11 of the Income Tax Act.

Analysis:
1. The appeal was filed against the order of the ld. Commissioner of Income Tax (Appeal) disallowing deduction u/s 11 due to the non-filing of the audit report in Form No. 10B with the return u/s 139. The AO had made an addition of Rs. 11,46,800 based on this deficiency.
2. The assessee contended that the audit report was filed within the allowed time frame after rectifying the deficiency, making them eligible for the deduction u/s 11. The counsel relied on legal precedents emphasizing that substantial compliance with procedural requirements suffices.
3. The Sr. DR argued in favor of the revenue authorities, stating that the failure to file the audit report within the prescribed time renders the assessee ineligible for the exemption. The CIT (A) upheld this view, emphasizing the importance of timely compliance with statutory provisions.
4. The Tribunal considered the submissions and legal provisions, relying on the jurisdictional High Court's order and relevant case laws. It was observed that the filing of Form No. 10B was a procedural requirement, and the assessee rectified the defect within the stipulated time, fulfilling the procedural obligation.
5. Referring to the High Court's decision in a similar case, the Tribunal concluded that the assessee's compliance with the audit report filing requirements within the allowed time period made them eligible for the deduction u/s 11. Consequently, the addition made by the AO was deemed unjustified, and the appeal of the assessee was allowed.

This detailed analysis of the judgment highlights the key legal arguments, interpretations of statutory provisions, and the ultimate decision of the Tribunal in favor of the assessee regarding the deduction u/s 11 of the Income Tax Act.